United States Cellular Corp.
), a subsidiary of
Telephone and Data Systems Inc.
), reported third-quarter 2013 loss per share of 12 cents, much
below the Zacks Consensus Estimate of earnings of 13 cents.
Comparing with the prior-year quarter, the results deteriorated
from earnings per share of 42 cents.
Quarterly revenues of $939.2 million missed the Zacks
Consensus Estimate of $941.0 million and declined 17.6% from
$1,140.4 million in the year-ago quarter.
Revenue, ARPU & Churn
Service revenues dropped 16.8% year over year to $862.3
million. Revenues from Equipment sales also decreased 26% year
over year to $86.2 million. Smartphone sales remained strong and
represented approximately 65.2% of all sold devices.
The reported quarter's retail service ARPU (average revenue
per user) was $50.92, higher than $50.59 in the year-ago quarter.
Post-paid churn remained unchanged from the prior-year quarter at
1.7% due to severe competitive pricing.
U.S. Cellular witnessed post-paid subscriber loss of 60,000
compared with a loss of 38,000 in the year-ago quarter. Prepaid
customer losses totaled 11,000 versus the addition of 57,000
customers in the prior-year quarter. The company exited the
quarter with a retail customer base of 4,875,000 compared with
5,808,000 a year ago.
U.S. Cellular generated $296.2 million in cash flow from
operating activities in the first nine months of 2013 compared
with $608.8 million in the comparable year-ago period. During the
third quarter, capital expenditures amounted to $239.3 million,
while free cash flow was $351.4 million.
For 2013, U.S. Cellular expects Service revenues of
$3,590-$3,640 million. Adjusted income before income taxes is
estimated in the range of $600-$700 million and capital spending
will be approximately $735 million.
Higher churn in the post-paid segment remains the primary
concern for U.S. Cellular with lower high-margin roaming revenues
also acting as a headwind. Furthermore, a higher mix of
smartphones and increased subsidies on 4G LTE devices will
continue to affect the company's expenses. Heavy capital
expenditures, spending on network integration, a competitive
market and intense pricing and regulatory pressures vindicate our
bearish stance on the stock.
U.S. Cellular - which operates in the U.S. telecom market with
Verizon Communications Inc.
) - carries a Zacks Rank #5 (Strong Sell).
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